QUESTION: I am bringing on a new search associate on salary versus my prior draw system. Since they are on salary, what do you do for the first quarter, not just pay commissions until cash comes in? – Tom, Denver, CO
ANSWER: Very briefly, the role of a search associate is to recruit on his or a senior recruiter’s desk. The entire role of the search associate is recruiting and feeding candidates to the recruiter. When I hired search associates, I usually brought them on between a $25,000 and $30,000 base. I paid them 5% of the total fee of the first $30,000 of cash in for the quarter, 10% of the next $15,000 cash in for the quarter, and 15% of over $45,000 cash in for the quarter and it resets every quarter, versus a base salary. So it is not a draw. What happens is really 5% bracket pays you back your salary and acts like a draw, just like every other sales compensation plan out there. In case you did not know, every sales compensation plan that has a salary is really a draw because most sales compensation plans have a salary and a tiered commission program.
Here is my philosophy on a new hire. There are two ways you can do this, Tom. One, you can switch it to billings, which I ultimately did for my own personal office. When I started coaching years ago, there was so much resistance because everyone has been paid on a cash in model, that for my clients I switched to cash in.
The search associate was not paid until the money came in. But I used the billing date, which we defined as the start date, to determine which bracket they fell in there was no discrepancy. They cannot claim I hid a check in my desk for an extra week if I was mean and evil and wanted to shortchange them and have them go to a lower bracket the next quarter.
For my account executives, which we did use a cash in date, I used the postmark from the post office as the official determiner. If the quarter started October 1St and we got a check on October 4th and it was postmarked September 30th, then September 30th was the date.
Those are some ways for those who track cash in, if you really want to “trust, but verify” with your employees to keep it really above board. Let say even in the model the way I outlined it, they bill something in the first quarter and it comes in the second quarter, they get 5% if it is less than $30,000. The whole thing in their first quarter is if they blank or if they do $20,000 and their quota was really $30,000, the deficit does not roll over because starting in the second quarter, if you have 5% of the first $30,000 and you bring in $20,000 in Q2, what happens is in Q3 it is 5% of the first $40,000, the original $30,000 plus the $10,000 deficit from the second quarter. So that is the only thing that rolls. The 10% bracket does not roll.
I hope that answers your question on how to pay them out. But if they blank their quarter, and like you said, they are doing a ton of really good work with a candidate, it rolls over and there is no deficit then it is 5% of the $30,000 starting Q2.